Spending cuts can help growth


Source: Jornal do Brasil, 30/10/2008

The rising interest rate slows economic growth. Therefore, in times of crisis, the government will have to tighten its belt and cut spending in order to continue “irrigating” the economy with more investments by companies and keeping consumption up. This is what some experts guarantee, who suggest cuts in projects of technological innovation and modernization of the machine. PAC resources, however, should not be tampered with.

For Luiz Antonio Fernandes da Silva, professor of economics at Faculdades Rio Branco, the correct thing would be for the government not to have encouraged salary increases and hiring in good times. Now, the growth outlook has diminished.

- The government promotes employment, so it would be contradictory to try to reduce public spending on layoffs - evaluates Fernandes, who suggests cutting back on new technologies, and PAC "is the last trick".

For Fernandes, if the government is concerned with growth, the reduction in interest rates is the way to keep investment, consumption and employment rates up.

Gilberto Braga, professor of Economics at Ibmec-RJ, is not in favor of layoffs to reduce expenses.

- Talking about dismissal at that moment is an attitude that creates instability - he believes.

For the economist, the government has to better assess the need to hold public tenders and hire staff.

- Selecting public spending better is a necessity. They have only increased in recent years and we do not see any improvement in the country's infrastructure - he criticizes. - If you need to hire people, hire one, but swelling the public machinery does not stimulate growth.

André Franco Montoro Filho, executive president of the Brazilian Institute of Competition Ethics (Etco), has the same opinion.

- There are certain expenses that compromise the future and that should not be made. The hiring of a lot of people needs to be reviewed. - highlights the former president of the National Bank for Economic Development (BNDES). - The salary increase is an expense that the government should not make. According to him, if the government spent less, interest rates could be lower. (CD / LT)